ALBANY – The Giuliani administration can’t require HIV- and AIDS-infected people to undergo special background checks to qualify for welfare, the state’s top court ruled yesterday.

The Court of Appeals’ 7-0 decision nullified the “eligibility verification review” process set up by the city under Mayor Giuliani in 1995.

The process requires would-be welfare recipients to apply for benefits from their home boroughs and then make a separate appearance in Brooklyn for an additional review.

The court, reversing an Appellate Division ruling, said it was “manifest” that a 1997 law passed by the City Council required the city to make it as easy as possible for sick people with AIDS or HIV to get public assistance.

The verification process is designed to eliminate applicants who don’t qualify for public assistance and has helped cut the city’s welfare rolls by some 400,000 since 1995.

AIDS advocates called it a “major defeat” for the Giuliani administration, but City Hall called the decision a “technical” one that would have little effect on how the city does business.

AIDS advocates had contended the review process was an unjustifiable burden on severely ill people, who often need immediate assistance.

They also contended that a special trip to Brooklyn was unduly burdensome for those crippled by AIDS.

“The main goal of the review is to remove people from the rolls and to save the city dollars,” contended Joe Pressley of the New York AIDS Coalition.

Michael Kink, a spokesman for Housing Works, an anti-poverty group, called the ruling “a major defeat for the Giuliani administration and a major victory for New Yorkers living with AIDS and HIV.”

City lawyers had argued that state and federal regulations required that the extra eligibility checks be made.

But the ruling held that while the state and federal regs “may authorize” an eligibility check, they “do not mandate it.”

The court also said that nothing in its decision “should be taken as prohibiting efforts or procedures to prevent or eliminate fraud.”

The city said the Human Resources Administration would be doing business as usual, for the most part.

“The decision affirms HRA’s right to conduct eligibility checks on all applicants for public assistance, but finds for HIV clients the eligibility caseworkers should be supervised by HRA’s Division of AIDS Services instead of its verification division. In this practice, this will be a distinction without a significant difference.”